What is 'Gen-Saki'

Gen-saki is a secondary bond market in Japan, also known as a repo market for its similarity to repurchase agreements. Gen-saki trading involves the buying or selling of bonds with a deal to buy or sell them back after a specified period.

BREAKING DOWN 'Gen-Saki'

Gen-saki translated into English means “present” (gen) and “future” (saki). Gen-saki is used for the purchase and resale of medium-term and long-term corporate and government bonds. The gen-saki market evolved in the 1950s because there was no secondary market in Japan for treasury securities issued by the Bank of Japan. Gen-saki is open to corporations and financial institutions. Until 1979 it was also open to foreign investors in 1979. Gen-saki transactions are available for any maturity dates up to one year, but most agreements are within three months or less. When setting the gen-saki rate, the yen London interbank offered rate (LIBOR) is often the basis, because it accurately reflects the deposit market rate.

The move toward gen-saki trading in Japan represents a step toward the international standard in repurchase agreements. Traditionally, Japan had used a “gen-tan” repurchase model, which uses cash as lending and borrowing collateral. The gradual move toward gen-saki trading in Japan is improving market efficiency and shortening the settlement cycle. Many believe its adoption, fueled by advancing technology, represents a significant growth opportunity and could result in future structural changes in Japan’s money markets. 

Examples of ‘Gen-Saki’ Transactions

There are three types of gen-saki transactions: own-account, consignment, and direct. Own-account gen-saki is when a securities firm sells a bond in its possession with a repurchase agreement for funding. Regulations were imposed on the amount of total outstanding own-account gen-saki in 1978 to ensure market safety and encourage sound management of securities firms.

Consignment gen-saki are repurchase agreements under which the bondholders, who are not securities firms, carry out a gen-saki transaction through securities firms. In other words, the borrower will sell securities with a repurchase agreement to the securities firms, and the securities firms will sell the same securities with the same date on its account to another buyer in the market, such as a corporate business or a financial institution with surplus funds. These transactions do not cause a change in the balance of security inventories in the securities firms. Limits on total outstanding funds in consignment gen-saki were introduced in 1974.

A direct gen-saki transaction is between a bank or other financial institution with surplus funds and a buyer, which could be a corporate business.

RELATED TERMS
  1. Retail Repurchase Agreement

    A retail repurchase agreement is an alternative to traditional ...
  2. Reverse Repurchase Agreement

    A reverse repurchase agreement is the purchase of securities ...
  3. Accelerated Share Repurchase - ...

    An accelerated share repurchase is a specific method by which ...
  4. Share Purchase Rights

    A holder of share repurchase rights has the option to repurchase ...
  5. Share Repurchase

    A program by which a company buys back its own shares from the ...
  6. Security

    A security is a fungible, negotiable financial instrument that ...
Related Articles
  1. Investing

    Repurchase Agreement

    A repurchase agreement is the equivalent of a short-term collateralized loan. An owner of marketable securities sells those securities to a buyer for cash. As part of the deal, the seller agrees ...
  2. Investing

    Brokerage Functions: Underwriting and Agency Roles

    Learning about underwriting and agency roles at a brokerage can give insight into how securities are issued and traded.
  3. Managing Wealth

    How to Make Money Selling Kids’ Items at Consignment Sales

    A quick way to sell your children's outgrown items is by selling them at a local and weekend consignment sale. Use these tips to earn more.
  4. Investing

    The Money Market

    The money market provides a relatively stable place to park capital that may be needed within a short time horizon.
  5. Trading

    What forex traders need to know about the yen

    The Japanese yen possesses some unique qualities that traders should know before jumping in.
  6. Investing

    The impact of share repurchases

    Share repurchases can have a significant positive impact on an investor’s portfolio and are a great way to build investor wealth over time.
  7. Investing

    Skyworks Announces $500 Million Stock Repurchase

    Along with a Q1 earnings beat, Skyworks announces a newly approved stock repurchase plan.
  8. Investing

    2016's Most Promising Money Market Funds

    Learn information on some of the most promising money market mutual funds for investors to consider adding to their portfolio in 2016.
  9. Insights

    Japan's Heavy Exposure to Rising Rates

    While Japan has seen falling interest rates for over two decades, quantitative easing could mean this is about change. Just how exposed is the country?
  10. Insurance

    The Share Buyback Report: The Financial Sector

    Examine historical buyback data from the financial sector to determine which quarters and companies contributed the most to repurchase activity.
RELATED FAQS
  1. What's the difference between primary and secondary capital markets?

    In the primary market, investors buy securities directly from the company issuing them, while in the secondary market, investors ... Read Answer >>
  2. What's the difference between the prime rate and the repo rate?

    Learn about repo rates and prime rates and their differences. Explore the uses of these rates in consumer lending and managing ... Read Answer >>
  3. Why do we need a secondary market?

    Find out why secondary markets play a crucial role in economic activity by promoting efficiency, safety, information and ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center